| Financial News
ECONOMIC SUMMARY AND OUTLOOK (May 2, 2008)
The U.S. lost fewer jobs than forecast in April, and the unemployment rate dropped, signaling that the economic slowdown may be milder than the 2001 recession. Payrolls decreased by 20,000 workers, following a revised drop in March that was slightly weaker than originally estimated. Economists had forecast payrolls would fall by 75,000 in April. Treasury notes fell and the stocks and the dollar rallied on speculation the Federal Reserve will refrain from lowering interest rates next month after seven cuts since September. An average of 121,000 jobs a month were eliminated in the first four months of the 2001 recession, compared with an average of 65,000 this year. On a positive note, factory orders rose more than anticipated in March.
This week, the Federal Reserve lowered the Federal Funds overnight bank-lending rate by ¼% to 2% in a bid to revive the economy. However, the probability of any additional rate cuts in the near future is only 16%, according to the futures market. The first of the government rebate checks that were part of the fiscal stimulus plan were distributed this week. The U.S. economy expanded 0.6% in the first quarter of the year as inventories increased because consumer spending slowed and business investment dropped. The rise in stockpiles, along with the smallest gain in household spending in seven years, indicates the economy could weaken further in coming months.
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